UK Buy To Let Mortgages Increase Market Share
Despite tighter credit conditions in the general mortgage market place, buy to let landlords are showing little sign of slowing their rate of borrowing. Based on the fourth quarter of 2007's figures, the buy to let sector increased its overall share of the market.
The reason for this lack of slow down in the buy to let sector appears to be due to investors not being affected as much by the tighter credit conditions compared to people who are buying a house to live in themselves.
The criteria for getting a
buy to let mortgage has remained constant in the final quarter at around 85% loan to value. Some other conditions have even been relaxed such as the average required rental income has been reduced to 120% of the mortgage payment, which is down from 125% previously.
As the housing market slows more sharply, the overall market percentage on outstanding balances on buy to let properties has increased to 10% and is expected to increase further.
It appears however that rental yields on average properties are not high enough to cover running costs, and so the only logical reason for the investment, in what is becoming a more and more specialised market, is capital gain (i.e. property prices increasing)
Moving forwards, economists have suggested that landlords are unlikely to continue to borrow so much, as firstly lenders are definitely becoming more cautious, there is more uncertainty in the bank of england base rate and finally 54% more mortgages and remortgages are over three months in arrears compared to a year ago (although buy to let mortgages are generally subject to lower numbers of arrears and repossessions than in other sectors).
Tags: mortgage, borrowing, property